EU import tariffs: are we looking at a 10% price hike for UK cars post-Brexit?

Published: 19 May 2020

 Cars imported via EU could be 10% more expensive
 No Brexit extension means tariffs apply from 1 January 2021
 Firms unlikely to want, or be able, to absorb costs

Christmas trees. Baking powder. Freezers. Padlocks.

These are just a few of our... no, wait. Not our favourite things. But they are useful things, and they're all facing a reduction in tariffs. Unlike our actual favouricars, which will be getting 10% more expensive when Britain leaves the EU on 1 January 2021

Trade deals have been negotiated to support a vast range of items, but not -as yet - cars. This is despite a vast number of the vehicles currently being sold in Britain originating in the EU, and the EU being one of our key trading partners for components and finished cars alike. In fact, last year the UK produced just over one million cars for export - over 80% of total capacity.

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That impressive statistic is slightly soured by the reality that Britain imported almost 90% of the cars sold here in 2019, and 80% come from the EU. For vans, it's even bleaker, with 94% of the UK's working vehicles made overseas.

WTO rules dictate that imported cars attract a 10% tariff, or tax - and as yet, there's no indication that Secretary of state for international trade, Liz Truss, has negotiated deals for the automotive sector, though manufacturing components are included in the £30bn of imports that do benefit from reduced tariffs.

If trading partners are operating under WTO rules, that also means UK-manufactured cars will be subject to a similar 10% cost where trade deals haven't been negotiated. Europe - or, the nations encompassed by the EU - accounts for over half of the UK's export market, with America and Asia devouring the largest share of the rest, suggesting trade deals with those markets may be beneficial.

That's only part of the story though, as Britain's exports are heavily biased towards the premium and luxury ends of the market, making a 10% additional cost far from trivial compared to the increase on mainstream imports coming here. Those brands are also manufactured by firms that have capacity to produce cars outside of the UK, reducing shipping costs as well as potentially minimising exposure to unwelcome duties and cost increases.

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Tariffs already existed when the UK was part of the EU, and between trading partners outside the EU, so this isn't as worrying as it may first appear. The Common Customs Tariff, which would have applied to cars built outside the EU, was 10% anyway.

In the past, the existence of tariffs on European cars could be said to have contributed to their perception as premium models. Now, it's likely that China and America will benefit. Perhaps we'll get the Renault Oroch pickup after all...

By Richard Kilpatrick

Technology writer and photographer since the early '90s, now car-obsessed, too

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